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The Federal Transportation Program and the New Budget Realities

Posted by Ken Orski on Thursday, April 7th, 2011

Innovation NewsBriefs
Vol. 22, No. 11

As Budget Committee chairman Paul Ryan is fond of saying, the debate in Congress has changed from how much we should spend to how much spending we should cut. The April 5 release of his proposed FY 2012 Budget Resolution, subtitled “The Path to Prosperity,” testifies to this new resolve. The New York Times’ David Brooks calls Ryan’s report “the most comprehensive and most courageous budget reform proposal any of us have seen in our lifetimes.” Although the Budget Resolution nominally addresses the FY 2012 budget, its message is likely to resound and influence the debate about fiscal policy and the role of the federal government in the U.S. economy long into the future.

The House budget resolution proposes to bring domestic discretionary spending down to  2008 levels and freeze this category of spending for five years. For the transportation sector this means a cut of at least $17 billion per year over the next several years in mandatory budget authority, according to Jeff Davis, Editor of Transportation Weekly. The budget resolution does not recommend specific funding levels or cuts for individual programs. Exceptionally, however, it does specifically call for a total elimination of the federal high speed rail program.

How big a multi-year transportation bill can we expect in light of the GOP long-range budget plan? By now, we have heard from multiple sources and on multiple occasions that future surface transportation funding will be limited to the tax revenues deposited into the Highway Trust Fund. Most recently, this position was reaffirmed by the House Transportation and Infrastructure Committee in its “Views and Estimates for Fiscal Year 2012” report, published on March 15 (See Innovation NewsBriefs, Vol. 22, No. 9, March 19).

While the Committee has not released any dollar figures, one can get a pretty accurate estimate of the size of the program that the Trust Fund can support by consulting the Congressional Budget Office (CBO) projections.

The latest CBO report (March 2011) projects total Trust Fund revenues (tax revenues and interest) at $230 billion over the next six years, or approx $38 billion/year. Add to this sum another $20 billion in unspent HTF balance at the end of Fiscal Year 2011, and we get a total of $250 billion available to fund a six-year bill, or an average of $42 billion/year.

This may require a narrowing of the scope of the federal-aid transportation program. Its primary mission will need to be confined to keeping the existing transportation assets in a state of good repair. Discretionary awards such as the TIGER and high-speed rail grants will probably have to be eliminated. So will programs that are deemed of little national significance or do not serve the national need — such as local community enhancements, various set-asides, earmarks, and “livability” projects that cater to narrow constituencies.

Most of these Trust Fund “hitchikers,” as Sen. James Inhofe calls them, will have to be handed off to state and local governments because the full resources of the Trust Fund will be needed to fund the federal share of maintaining and preserving the nation’s highway and transit infrastructure. Assuming a traditional 25-75 percent split between federal and state/local expenditures for system maintenance and preservation, this federal-aid contribution could generate a total national surface transportation program of $170 billion per year— $50 billion short of the level recommended by the National Transportation Policy and Revenue Commission, but still a respectable level of funding.

Will states and local governments be willing and able to pick up the slack? Some will, others may not. Many states and localities have been wiling to approve significant transportation improvement programs– provided the objectives are clearly spelled out. Virginia, for example, has recently enacted a $3 billion transportation bill that identifies some 900 discrete transportation improvement projects. The law passed because people knew what they were voting for. Many other states and localities have been willing to do the same. In fact, voters approved 77 percent of local transportation ballot measures in 2010 according to the Center for Transportation Excellence.

While the above scenario may sound depressing to some who have become accustomed to the recent discretionary spending levels—distorted by the stimulus spike which nearly doubled transportation spending in one year— to others it sounds like returning the federal-aid program to its original roots. It means refocusing the federal mission on legitimate federal objectives, restoring the program’s lost meaning and sense of purpose, and giving states and localities more voice in managing their transportation future.

What about new infrastructure investments? Undoubtedly, they are necessary in the long run because of the need to replace aging facilities and accommodate future growth in population. But, if we accept Paul Ryan’s reasoning, major investments will have to be deferred until better days — after the recession has ended, the economy has started growing again and the federal budget deficit has been reined in. At that more distant moment in time, perhaps toward the end of this decade, the nation might be able to resume investing in new infrastructure and embark on a new series of “bold endeavors” — major capital additions to the nation’s highways, bridges and rail systems. For now, however, prudence, good judgment and the overriding compelling need to rein in the deficit, dictate that we learn to live within our means. And that means spending no more than what we pay into the Trust Fund.

C. Kenneth Orski is a public policy consultant and former principal of the Urban Mobility Corporation. He has worked professionally in the field of transportation for over 30 years, in both the public and private sector. He is editor and publisher of Innovation NewsBriefs, now in its 22nd year of publication.

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